In this course, you’ll learn the key components of modern-day investment strategies which utilize fintech. Professors Natasha Sarin and Chris Geczy of the Wharton School have designed this course to help you understand the complex structure of payment methods and financial regulations, so you can determine how fintech plays a role in the future of investing. Through analysis of robo-advising and changing demographic forces, you’ll learn how basic elements of trust underlie complex choice architecture in investments and impact investing. You’ll also explore payment methodologies and how fintech is emerging as an entrepreneurial solution to both investments and payment systems. By the end of this course, you’ll be able to identify different financial technologies, and understand the dynamic between the innovations and regulations, and employ best practices in developing a fintech strategy for yourself or your business. No prerequisites are required for this course, although a basic understanding of credit cards and other payment methods is helpful.

CF

clear and concise teachings lead to a quick understanding of the material presented. video length was great; never too long. visuals were easy to understand and interpret.

AA

Jun 30, 2019

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My first course in Coursera and it did not disappoint! I recommend this FinTech course to anybody seek a quick yet detailed introduction to the world of FinTech! Thank you

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Module 3: Payments

In this module, you’ll be introduced to the foundations of payment methods, and focus more closely on the history and regulation of payments. You’ll begin by examining the history and current global trends in payment methods by analyzing UnionPay. Then you’ll look at the evolution of credit cards, the two-sided payment markets, and the inherent issues of the credit card payment system. You’ll learn key aspects behind complex payment processes, the regulation behind payment methods, and promising solutions from fintech for concerns in the credit card market. By the end of this module, you’ll have a richer understanding of the growth of payment systems and their regulations, and of the impact of fintech in the future of payment systems.

講師

Christopher Geczy

Adjunct Professor of Finance

Natasha Sarin

Assistant Professor of Law

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In addition to the complexity of these series of transactions that we've outlined, another problem in the payment system is that there tends to be a substantial cost burden for merchants at various points in this transaction chain. Let's go back to our initial transaction for groceries to try and understand the nature of fees in this setting. Remember that the cardholder, the consumer here is buying a $100 of groceries from a merchant. You would think and if that transaction was happening with cash, that would mean that the merchant gets a $100 for a $100 of groceries. In this setting though that's not true, the merchant agrees to accept a sum less than a $100 for that transaction because it has to pay a fee for processing. It initially pays a fee to its own bank if the acquiring bank, that's on the order of, let's say, two and half percent. This is known as a merchant discount fee which is kind of an ironic name given that the merchant is bearing this cost. The acquiring bank then pays the card network, in this setting master card, a small fee for processing this transaction and for providing furnishing the funds from the issuing bank to the acquiring bank. The issuing bank also pays the card network a small fee for completing this transaction, and the acquiring bank pays the issuing bank directly in the form of an interchange fee for this transaction being processed. All in all, these fees can total between one and three percent of total transaction value for merchants or at least did historically in the US before recent regulation restricted the ability of banks to levy debit interchange fees on merchants though credit card interchange has been left unregulated. What's quite interesting is that interchange fees tend to vary depending on the card network and the kind of payment instrument that's being used. So historically, debit interchange fees tend to be lower than credit card interchange fees with pin debit having the lowest processing costs. Credit card fees tend to be higher. An American Express credit card interchange fees tend to be the highest, because their business model involves recruiting customers who are high value customers from the perspective of merchants, those who are wealthy, those who transact frequently on their cards and encouraging these cardholders to use their transaction instrument through a series of incredibly attractive rewards even relative to its card network competitors. It is striking that in the United States, merchants can pay let's say, $3 of a $100 transaction in the form of processing fees to financial institutions and card networks. In response to these really quite high fees that they bear as we've discussed often their second highest cost of operating after labor, many merchants respond by simply saying they won't accept certain kinds of cards or having a minimum required amount before they're willing to process a debit or credit transaction. The high cost associated with payment processing suggests an opportunity for financial technology companies that use e-payment services to come in and usefully disrupt the industry and benefit merchants by creating a lower-cost processing system, but also, consumers by eliminating the inconvenience of card minimums being required in order to complete transactions. Some innovators in this space include large merchants like Starbucks. Rather than having to bear a processing fee every time a consumer goes and buys a latte, what Starbucks has done is essentially created an app where consumers buy a gift card let's say, $50 or a $100 gift card and keep that gift card on their consumer wallet. That means that Starbucks now only has to pay a processing fee every time you reload or purchase a new gift card, rather than every time you go and buy your latte. Other innovators include Venmo, which is a mobile app that was first used for sending cash quickly to other users, but is now used to pay merchants without exorbitant processing fees. PayStand is an example of a cloud-based billing and payment platform that's trying to improve payments between businesses and reduce these transaction fees substantially. The point that the founder of PayStand, Jeremy Almond makes sort of quite profoundly, is that in this movement toward a cashless society that seeks to more efficiently allow consumers and merchants to transact with payment instruments like credit and debit cards, it will be imperative to move away from high processing fees that tend to inhibit the growth of these particular platforms. This requires a substantial investment in technology for decentralized networks that will allow merchants to receive their funds, but not require a substantial penalty in the form of a high processing fee for these particular transactions.